Two more cases of unscrupulous dealings courtesy of the Insolvency Service. This week it’s a dodgy diamond dealer and the director of an insolvency practice who really should know better.
The Dodgy Diamond Dealer
In the first of this week’s cases, we take a look at the shady story of Solitaire Alternatives Ltd, a company that purported to sell diamonds to members of the public as an investment, without ever buying the diamonds in the first place.
Following an investigation by the Insolvency Service, the High Court called time on Solitaire’s disreputable practices by winding the company up in the public interest.
Despite failing to cooperate with the investigation at any stage, the Insolvency Service was still able to lift the lid on Solitaire’s fraudulent activity by obtaining information from third parties. This revealed that the company had received £747,000 from investors, without anything to show that a single diamond had ever been bought.
Investors Asked to View Their Non-Existent Diamonds
Solitaire’s website included a recommendation that the diamonds purchased on behalf of investors should be kept in storage facilities held at the London Silver Vaults located on London’s Chancery Lane. In its terms and conditions, the company stated that all clients’ diamonds would be allocated to an account in the client’s name at the Malca Amit Bonded warehouse.
However, both the London Silver Vaults and Malca Amit denied the existence of any such agreement with Solitaire about the storage of diamonds. London Silver Vaults added that it had received enquiries from customers wanting to view their diamonds, but in reality, these diamonds did not exist.
For a time, Solitaire did have a registered address in London which was used for the receipt of the post and the occasional sales meeting, but by the time the Insolvency Service investigation began, this arrangement had been terminated for the company’s failure to pay its rent.
Selling Thin Air Instead of Diamonds
Commenting on the court’s decision, David Hill of the Insolvency Service, said: “This formally brings to a halt a disreputable business carried on by this company which did not co-operate with the investigation, enticed investors by spinning a web of lies and sold thin air instead of diamonds.
“The Insolvency Service will not allow companies to operate in this way and will investigate abuses and close down such companies if, as in this case, they are found to be operating against the public interest.”
The Director who Really Should Know Better
David Pollard, the director of an accountancy firm and insolvency practice, has been disqualified from acting as a director for six years for engaging in the type of pernicious practices he is professionally responsible for trying to prevent.
Mr Pollard (44) from Chesterfield, Derbyshire, gave an undertaking to the Secretary of State for Business, Innovation and Skills, to not act as a company director for six years following an Insolvency Service investigation.
Wound up in the Public Interest
Mr Pollard was the insolvent company director of TAG Ltd and The Recovery Partnership Ltd, which were wound up in the public interest by the High Court on 9 May 2013. At this time the two companies owed creditors and shareholders £90,434 and £8,484 respectively. There was also a claim made at a later date for £156,615, which was disputed by Mr Pollard and is not included in the company’s liabilities.
The Insolvency Service investigation found that Mr Pollard had failed to separate the financial affairs of the two businesses, making it impossible to differentiate between the income and expenditure generated by each.
The investigators also found that £24,157 was retained after companies had been wound up or dissolved, duplicate fees of at least £12,100 were taken, and payments of £30,200 were made to connected parties and not disclosed to creditors.
Welcoming the decision to impose the disqualification, Ken Beasley, official receiver at the Insolvency Service, said: “The Insolvency Service will always look closely at individuals who hold themselves out to be financial professionals but who cannot be trusted to handle people’s money in a proper way.”
Thankfully the number of Insolvency Practitioners found to be acting fraudulently is very few in number and in this case, a winding up petition was entirely appropriate. Winding up or compulsory liquidation as it was, in this case, is the most serious act that can be taken against an insolvent company. Not all directors find themselves receiving winding up petitions for major debts or even for the right reason. A winding up petition is not a means of debt collection and this is often wrongly used this way which can backfire on the petitioning creditor so be aware.
If you’re a London-based company and wish to speak to a Company Debt expert regarding any insolvency or HMRC-related issues, please contact the Company Debt London office on 08000 746 757 or email email@example.com.